Torchmark (TMK) Q4 Earnings Beat Estimates, Revenues In Line

Torchmark Corporation’s TMK fourth-quarter 2017 net operating income of $1.24 per share beat the Zacks Consensus Estimate by 0.8%. The bottom line improved nearly 7.8% year over year on the back of higher premiums from the Life and Health segments. Lower share count on continuous buybacks also drove the upside.

Including realized gains on investments of 10 cents, administrative settlement of (4 cents) and a tax reform adjustment of $7.41, net income skyrocketed 677.7% year over year to $8.71 per share.

Full-Year Highlights

For 2017, Torchmark reported net operating income per share of $4.82, surpassing the Zacks Consensus Estimate by 0.4% and improving 7.3% year over year.

Total revenues of $4.1 billion grew 4.7% year over year.

Behind the Headlines

Torchmark reported total premium revenues of $826.5 million, up 4.9% year over year. This upside was primarily driven by higher premiums from Life and Health Insurance businesses.

Net investment income increased 3.9% year over year to $213 million.

The company’s total revenues of $1 billion grew 4.6% from the year-ago quarter. This top-line improvement was driven by growth in Life and Health Insurance premiums along with higher net investment income. Revenues were in line with the Zacks Consensus Estimate.

Excess investment income, a measure of profitability, dipped 0.7% year over year to $57.6 million.

Torchmark’s total insurance underwriting income grew 9.8% year over year to $163.2 million. Improvement in Life and Health Insurance underwriting margins resulted in the upside. However, higher administrative expenses partially offset this improvement.

Administrative expenses increased 9% year over year to $55 million.

Total benefits and expenses rose 5.3% year over year to $841 million.

Segment Update

Premium revenues at Torchmark’s Life Insurance operations increased 5.5% year over year to $580.7 million, attributable to higher premiums written by the distribution channels like American Income Agency, Global Life Direct Response and LNL Agency. While American Income Agency grew 9%, Global Life Direct Response and LNL Agency rose 4% and 2%, respectively. Life Insurance underwriting income improved 12.3% year over year to $160.2 million. Net sales at the life insurance segment were 1% higher on a year-over-year basis.

Health Insurance premium revenues rose 3.4% year over year to $245.8 million while underwriting income of $55.1 million increased 4.4% year over year. Net health sales grew 14% year over year.

Annuity underwriting margins declined 15.6% year over year to $2.7 million.

Financial Update

Shareholders’ equity as of Dec 31, 2017 surged 36.4% year over year to $6.2 billion.

Torchmark reported book value per share (excluding net unrealized gains on fixed maturities) of $39.77, up 23.8% year over year.

As of Dec 31, 2017, operating return on equity was 14.3% compared with 14.6% as of Dec 31, 2016.

Share Repurchase and Dividend Update

In the quarter, Torchmark repurchased 0.9 million shares for a total cost of $82 million.

For 2017, the company bought back 4.1 million shares for $325 million.

The company announced a dividend of 15 cents per share in the reported quarter, marking a 7.1% hike from the year-ago quarter.

2018 Guidance

Torchmark estimates net operating income from continuing operations between $5.90 and $6.10 per share.

The $6 mid-point of this guidance is higher than the earlier projection’s mid-point owing to the effect of lower statutory tax rates included in the Tax Legislation.

Among other players from the insurance industry having reported fourth-quarter earnings, the bottom line of Brown & Brown, Inc. BRO, MGIC Investment Corporation MTG and The Progressive Corporation PGR beat the respective Zacks Consensus Estimate.

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